Systems Solutions

Order entry

Development of business

The first nine months of 2020 were dominated by the ongoing strategic development of our systems solutions business with a focus on growth and future viability, as well as our extensive transformation program, and the effects of the coronavirus pandemic.

Under the transformation program we realigned our organization and workflows, adjusted capacities, and developed a new strategy for our portfolio. Stand-alone portfolio units assume responsibility not only for our growth areas but also for our traditional IT business. Consistent with our efforts to implement the Group’s strategy pillar “Lead in business productivity,” on July 1, 2020, we combined our B2B telecommunications operations in our Germany operating segment.

Furthermore, the effects of the coronavirus pandemic on the global economy continue to impact on the financial position of our business customers. In some cases, this led to delays in current projects and the postponement of deal closures, especially in the areas of traditional IT and digital solutions. As a result, order entry in our Systems Solutions operating segment decreased year-on-year by 23.6 percent in the first nine months of 2020, which was below our expectations.

Development of operations

Total revenue

Total revenue in our Systems Solutions operating segment in the first nine months of 2020 decreased by 4.9 percent year-on-year to EUR 3.1 billion, reflecting the coronavirus-induced decline of the IT market in Western Europe. The upward revenue trend in our growth areas public cloud and security was not sufficient to fully offset the declines in traditional IT and project business. The development of the digital solutions business was particularly affected by the impact of the coronavirus pandemic on the automotive industry.

Adjusted EBITDA AL, EBITDA AL

In the first nine months of 2020, adjusted EBITDA AL in our Systems Solutions operating segment decreased only slightly by 1.7 percent year-on-year to EUR 173 million. The decrease in earnings in traditional IT business and in project business, partly due to the effects of the coronavirus pandemic, were largely offset by efficiency enhancement effects from our transformation program and strong growth in our growth areas (especially public cloud, Internet of Things (IoT), and security). EBITDA AL increased by EUR 58 million compared with the prior year to EUR 15 million, thanks to the streamlining of the portfolio in 2019. As a result, special factors were down EUR 62 million on the prior year, at EUR -158 million.

Adjusted EBIT, EBIT

Adjusted EBIT in our Systems Solutions operating segment in the first nine months of 2020 improved by EUR 42 million year-on-year, coming in at EUR -34 million, mainly as a result of declines in depreciation and amortization. The realignment of the B2B telecommunications business in combination with the effects of the coronavirus pandemic triggered ad hoc impairment testing, which identified a reduction in the business outlook for IT operations. This resulted in the recognition of a non-cash impairment loss of around EUR 0.4 billion on non-current assets in the systems solutions business, which reduced EBIT to EUR -0.6 billion.

Cash capex

Cash capex in the Systems Solutions operating segment stood at EUR 163 million in the first nine months of 2020, compared with EUR 219 million in the prior-year period. This was due to a reduced need for investments in traditional IT business and in the area of digital solutions, which was impacted by the effects of the coronavirus pandemic on the automotive industry. Going forwards, we will continue to focus our investments on developing our growth business.